The Federal Government has released draft legislation for a Domestic Gas Reservation Scheme (DGRS), signalling a significant shift in Australia’s energy policy aimed at lowering gas prices for households and businesses. The proposed laws, unveiled on September 10, 2026, stipulate that gas exporters will be required to reserve “up to 20 per cent” of their liquefied natural gas (LNG) exports for the domestic market.

However, the implementation of this Domestic Supply Obligation (DSO) has been delayed by 12 months, now slated to commence on January 1, 2028, instead of the previously anticipated July 1, 2027. This adjustment aims to align with existing gas company contracts, according to Energy Minister Chris Bowen.

Why This Matters for Your Gas Bill

The core objective of the DGRS is to ensure a more affordable and reliable gas supply for Australian consumers, supporting the government’s broader “Future Made in Australia” agenda. While no specific dollar amount of savings has been guaranteed, the government states the policy will put “downward pressure” on energy bills for the approximately 5.1 million homes and heavy industries reliant on gas.

For years, Australia has faced the paradox of being one of the world’s largest LNG exporters while simultaneously grappling with concerns over domestic gas shortages and high prices on the East Coast. The new framework seeks to rectify this by increasing the pool of gas available locally, thereby reducing the risk of price spikes driven by tight market conditions.

“We’re not setting a price target, floor, ceiling – this is about supply, not price,” Energy Minister Chris Bowen told reporters. “Our analysis and the analysis of industry shows us that this policy is what gives us the best chance of having gas at competitive prices.”

Key Details of the Draft Legislation

The draft Domestic Gas Reservation Bill 2026 outlines several critical components:

  • “Up to 20%” Reservation: Unlike earlier iterations that considered a mandatory 20% reservation, the updated proposal allows for flexibility, stating “up to 20%” of LNG export volumes will be targeted for domestic use.
  • Delayed Commencement: The Domestic Supply Obligation will now begin on January 1, 2028, with the export licence application process commencing on January 1, 2027.
  • Demand Calibration: The 20% figure may be adjusted downwards based on a demand calibration process by regulators, existing state-based reservation arrangements (such as Western Australia’s 15% scheme), or infrastructure constraints.
  • “Must Sell” Rule: The legislation maintains a “must-sell” rule, designed to ensure that the reserved gas genuinely reaches the domestic market.
  • Reduced Ministerial Discretion: The framework aims to provide greater predictability for gas users and producers through reduced ministerial discretion and a five-year window for the obligation.
  • Demand-Side Option: An inclusion of a demand-side option could offer exporters flexibility while assisting gas users in upgrading their equipment.
  • Respect for Existing Contracts: The policy is designed to respect existing export contracts.

Industry Reacts to the Changes

The Australian Energy Producers (AEP), a key upstream lobby group, acknowledged that the proposed laws are better calibrated with domestic market needs. However, they criticised the potential for an “110pc oversupply” of the East Coast gas market, arguing it could destroy investment signals and disadvantage smaller, domestic-focused producers. AEP specifically urged the government to revise the “must sell” requirement, fearing it could force producers to sell gas below cost or on non-commercial terms.

In contrast, the national employer association Australian Industry Group (Ai Group) expressed encouragement, particularly welcoming the maintenance of a strong “must-sell” rule and improved predictability. Ai Group Chief Executive Innes Willox noted, “The right result would see all in-market exporters contribute as much as possible towards meeting demand within the 20% reservation cap.”

Broader Context for Australian Energy Bills

This gas reservation policy comes at a time when Australian households and businesses are navigating a complex energy landscape. While federal energy bill relief credits concluded at the end of 2025, regulated electricity prices have seen reductions in many states from July 1, 2026. The government’s focus on gas supply complements a range of existing and new initiatives designed to manage energy costs. For a comprehensive overview of support available, readers can refer to Australia’s Energy Bill Relief Landscape in 2026: A Comprehensive Guide to State and Federal Support.

The DGRS represents a long-term strategic move to enhance Australia’s energy security and affordability by ensuring a stable supply of a critical fuel. Its success will depend on the fine balance between protecting domestic consumers and maintaining a viable investment environment for gas producers.